Menendez Outlines Opposition to Big Bank Deregulation Bill; Asks Why Senate is Spending Week Working for Big Banks and Not to Pass Common Sense Gun Laws
Proposes amendment requiring mutual funds to disclose to their shareholders whether they invest in the gun industry.
WASHINGTON, D.C. – U.S. Senator Bob Menendez, senior member of the Senate Committee on Banking, Housing and Urban Development, spoke on the Senate floor this afternoon regarding his opposition to S. 2155, the banking deregulation bill, currently being debated. In the wake of the mass shooting in Parkland Florida, which galvanized calls for Congress to pass sensible gun safety measures, Senator Menendez also admonished Republican leaders’ decision to work instead on rolling back consumer protections.
“Only in Washington would anyone think it’s a good idea to commemorate the ten-year anniversary of the financial crisis with a bill that dares big banks to get bigger and increases risk to taxpayers,”said Senator Menendez.
“I’m proposing an amendment that requires mutual funds to disclose to their shareholders whether they invest in the gun industry,” Sen. Menendez added. “Because it’s downright offensive to be considering a banking bill this week instead of pressing corporate America to step up in the fight against gun violence that rips our country apart year after year.”
Below are his remarks as prepared for delivery:
I rise today to explain my opposition to the banking deregulation bill, S. 2155.
First, I’d like to say that I’m appalled this is how the Senate is spending its time this week. Three weeks ago, 17 students and teachers were murdered when a teenager armed with an AR-15 – decorated with swastikas – opened fire at Stoneman Douglas High School in Parkland, Florida.
But this week, we’re not banning the sale of high-capacity magazines that enable mass shooters to fire 30, 40, or even 100 rounds without stopping to reload.
We’re not closing the gun show loophole or stopping violent people from buying assault weapons online with the click of a button.
We’re not taking steps to report more cases of severe mental illness to the National Instant Criminal Background Check System.
We’re not passing President Trump’s proposal to raise the age one can buy an assault weapon to 21 years.
Simply put: this week we’re not doing anything to stop the next mass shooting from taking place.
So, what are we doing this week? This week the Republican majority has brought to the floor legislation rolling back safeguards we passed after the financial crisis of 2008. Not exactly something the American people are clamoring for!
Now, I want to be clear why I oppose this bill as written.
It’s not that I don’t support measures that provide meaningful relief to small banks, credit unions, and consumers. It’s not that I don’t believe in reexamining regulations and looking for ways to reduce compliance costs.
And it’s not that I don’t agree with efforts to better calibrate the rules of the road for small banks and credit unions while strengthening protections for consumers, investors, and taxpayers.
Indeed I would support a bill like that. But that’s not the bill before us today.
The bill before us today brings back risky mortgage lending practices that increase the likelihood of foreclosures.
It undermines our efforts to police discriminatory lending practices. And it would allow 25 of America’s 38 biggest banks to escape the safeguards we adopted after the 2008 financial crisis.
A crisis that destroyed more than $12 trillion worth of American wealth, required huge bank bailouts, sent our economy into a tailspin, and saddled us with the Great Recession.
Ten years later, it’s worth remembering what caused that crisis.
Mortgages designed like ticking time bombs for homebuyers – and for our economy at large. Financial institutions making risky bets on those risky mortgages. And regulators who turned a blind eye to these risks.
Borrowers were steered into loans with low interest rates – often below four percent – at the start. But once the promotional period ended, those “teaser rates” disappeared. Higher interest rates kicked in. And millions of borrowers suddenly saw their mortgage payments go through the roof – even doubling in many cases.
Between 2004 and 2006, a third of all adjustable rate mortgages were designed this way. And at a time of stagnant wages, millions of families couldn’t keep up.
That’s why a wave of foreclosures over took our housing market – displacing families, decimating home values, and destabilizing neighborhoods.
From 2006 to 2014, more than 9.3 million families lost their homes to foreclosure, sold their homes at a significant loss, or surrendered their homes to the bank.
For communities of color, the crisis was even worse.
African American and Latino borrowers were at least twice as likely to receive a higher-cost loan white applicants, even when controlling for income and credit scores. And they were nearly 50 percent more likely to face foreclosure during the crisis.
So what did we do about it?
We passed laws to stop lenders from offering mortgages that were, in many ways, doomed to fail.
We said that from now on, banks and mortgage lenders would have to make a reasonable and good faith determination that borrowers could pay back their loans by looking at income, employment, credit history, monthly expenses and other metrics.
And, we prohibited banks from using “teaser” rates to determine whether a borrower could repay a loan. We did the sensible thing and required them to make sure borrowers could actually afford their payments once the higher interest rates kicked in.
We also passed reforms to better catch discriminatory lending practices – because we know that in many cases the riskiest products were offered to minority communities.
We asked banks to provide data they already collect on things like debt-to-income ratios, credit scores, loan-to-value ratios, interest rates, and loan terms.
This way, we could better identify emerging risks and possible discriminatory lending practices in our communities.
Were all of these reforms perfect? Of course not. Have they made our mortgage lending system safer, smarter, and fairer for creditworthy borrowers? Absolutely.
That doesn’t mean we still don’t face challenges. New Jerseyans know that.
Our state still suffers the highest foreclosure rate in the nation. And many New Jersey neighborhoods still struggle with frequent foreclosures, abandoned homes, and their painful consequences.
Likewise, discrimination still persists. I was appalled by a report released in January that showed African American and Latino families – even controlling for income, loan amount, and location – continue to be disproportionately denied conventional mortgages.
These practices are nothing short of modern-day redlining. We see it in Camden, New Jersey, for example, where black applicants are still more than two and half times likelier to be denied than white applicants.
Now, ten years after the crisis, Congress is poised to turn back the clock.
Under this bill, some banks will once again be able to offer mortgages with “teaser” rates of four percent that more than double in just two years. Without ever verifying if a borrower could afford a nine percent interest rate.
All they have to do is keep the loans on their books.
And this bill will excuse 85 percent of banks from sharing the data that we need to identify discrimination and ensure all creditworthy borrowers have a fair shot at the American dream of homeownership.
If this sounds familiar, that’s because it is. History is repeating itself.
And beyond making mortgage lending riskier and less fair, this bill removes guardrails we put in place for 25 of the 38 largest banks in the country.
These are the banks identified as systemically important during the crisis – the banks that received $47 billion in bailouts.
I appreciate my colleagues who point out this bill’s benefits for community banks and credit unions. I mean that. But I fear these provisions mask giveaways that will make big banks bigger and ultimately hurt smaller banks struggling to compete.
Under Title IV, this bill significantly cuts oversight of banks with assets between $50 billion and $250 billion.
Have we so quickly forgotten the lessons we learned after the crisis?
Do we not remember how the government had to arrange forced mergers of Countrywide, with $200 billion in assets, and National City, with $145 billion in assets, because their near-failures worked to spread risk from Wall Street to Main Street?
Do we really want to weaken these guardrails – the stress tests and the capital planning requirements to ensure banks can survive a crisis. The living wills that ensure they have a feasible way to unwind if things go south. The minimum liquid assets they must hold in the event they lose access to funding markets?
When taxpayer dollars are on the line, I don’t think it’s unfair to ask big banks to be safe and smart. On the contrary, it’s unfair to the American people who will have to bail them out when they get into trouble!
Supporters of this bill are quick to point out that it preserves the Federal Reserve’s authority to take action if they become concerned about a bank with less than $250 billion in assets.
Well forgive me for not having confidence in regulators with a long-history of doing too little and too late. This is exactly the kind of risk that taxpayers, homeowners, and investors can’t afford.
As the Chairman of the Financial Crisis Inquiry Commission recently wrote, “History has shown, time and again, that the failure of financial firms that are not among the largest mega-banks can pose systemic risks to financial stability.”
And according to the Congressional Budget Office, these weaker protections make it more likely that taxpayers will once again have to bail out banks.
At the end of the day, this bill injects tremendous risk into the system and undercuts the tools our financial cops on the beat need to monitor that risk, leaving taxpayers on the hook if risk again turns to crisis.
Rather than protecting families, this bill is packed full of goodies for large banks and special interests because consumers – the families who’d suffer the most in another crisis – didn’t have a seat at the table.
As a member of the Banking Committee, I worked in good faith to amend this bill and make it better.
I offered an amendment, Christopher’s Law, to better protect consumers like the Bryski family in New Jersey. While mourning the tragic loss of their son, Christopher, the Bryski’s were stunned to learn they’d be responsible for paying for an education their son could never use because they had co-signed his private student loan.
And I appreciate that my colleagues incorporated major components of Christopher’s Law to protect families that suffer the tragic loss of a loved one into the manager’s package for the bill.
But when you look at the totality of this bill’s provisions, the fact remains that we couldn’t get an inch for consumers in exchange for the miles this bill gives to big banks.
Take for example my amendment to enhance protections for military service-members who often struggle to protect their credit while serving our country.
Or the amendment I offered to prevent the rewards of this bill from flowing to banks that adopt punishing, Wells Fargo-style sales cultures that put consumers at risk.
These are just some of the pro-consumer, commonsense amendments that were rejected in committee.
Ultimately, I still believe that Congress could pass legislation that provides targeted relief to community banks and credit unions, but not in exchange for erasing the standards that protect hardworking families and our economy from systemic risk.
So you can bet I’ll be working again here on the floor to get those amendments included in full.
Senator Cortez Masto and I will offer an amendment to ensure banks keep reporting the data we need to police against discriminatory lending practices.
Likewise I’m offering an amendment to require consumer reporting agencies like Equifax quickly disclose data breaches, and require a federal study of how these breaches impact consumers over the long-haul.
And finally, I’m proposing an amendment that requires mutual funds to disclose to their shareholders whether they invest in the gun industry. Because it’s downright offensive to be considering a banking bill this week instead of pressing corporate America to step up in the fight against gun violence that rips our country apart year after year.
These measures – if adopted – would make a bad bill a bit better.
But as we quickly approach the 10-year anniversary of the government-backed bailout of Bear Sterns, I cannot in good conscience vote to remove the guardrails we put in place to prevent big banks from playing fast-and-loose with our economy in the first place.
The financial crisis and recession stripped trillions of dollars in wealth from communities all across the country. And while banks were bailed out, families were left reeling with the consequences.
From foreclosures to job losses to hard-hit retirement accounts and falling home values, the American people bore the brunt of the financial crisis.
For years, Washington protected Wall Street from sensible regulations when we should have been protecting consumers. Unfortunately, it took the greatest financial crisis since the Great Depression for us to pass the Wall Street Reform and Consumer Protection Act.
For us to make a fundamental choice to reject a system that took advantage of consumers, and instead stand for a banking system that is more fair, transparent, and accountable to the American people.
To quote the Spanish philosopher George Santayana, “Those who cannot remember the past are condemned to repeat it.”
Only in Washington would anyone think it’s a good idea to commemorate the ten-year anniversary of the financial crisis with a bill that dares big banks to get bigger and increases risk to taxpayers.
I look forward to the day when this Congress strives to do better by the working families that lost their homes, their jobs, and their lifesavings during the crisis.
The hardworking families who had to fight their way back from the Recession without bailouts. And are counting on us to fight for them in Washington.
FOR IMMEDIATE RELEASE:
March 8, 2018